During the pandemic, streaming media and in particular video has exploded. And it’s not just Netflix and Disney+ — there is also growing demand for video services offered through libraries. The significance of this market for licensed streaming media services was cemented last week when OverDrive acquired Kanopy.
These companies, both owned by private equity, have made strong inroads in the public library market, but they have struggled for related reasons in the academic sector. At a minimum, OverDrive’s acquisition creates a public library powerhouse with continuing growth aspirations. Both services, however, have struggled in the academic sector. Will the combination now provide the scale needed to create a more sustainable offering for this market?
Many Scholarly Kitchen readers will be primarily familiar with OverDrive as an ebook and audiobook lending service widely utilized in public libraries. It has changed hands itself a few times in the recent past, first bought by Rakuten for $410 million in 2015 and then iby KKR, a global investment firm (purchase price not disclosed), in 2020. Rakuten’s portfolio includes the Kobo e-reader, but OverDrive remained compatible with competitors (most notably Kindle in the US) and it appears that device agnosticism will continue to be its business strategy. The acquisition by KKR enabled OverDrive to acquire the library assets of another KKR-owned property, RBMedia, a major producer of audiobooks.
Kanopy is an on-demand streaming video platform that serves the public and academic library market with a huge library of documentary and entertainment film content. OverDrive acquired Kanopy from L Squared Capital, which has owned Kanopy since 2018, and during that period grew from serving approximately 1,000 libraries to over 2,300 libraries. While the purchase price was not released, this seems to be an ideal moment to buy a company that has so successfully ridden the wave of demand for streaming video content and Kanopy’s content will certainly enhance OverDrive’s streaming video offerings.
Pricing Models for Streaming
Kanopy’s pricing structure, similar to other offerings in the streaming video space, is a challenge for both public and academic libraries. In contrast to mainstream streaming platforms like Netflix or Hulu, which are typically driven around a flat fee subscription model, Kanopy is provided through library affiliation and there is no “all you can eat” site license. Instead, for academic libraries, Kanopy relies on a “flexible” acquisition model that is primarily patron-driven. As part of that model, libraries can choose whether patrons can self-select titles to view or if they must first make a request through the library. For each selection the library is then charged a licensing fee, which as per Forbes in 2019 ranged in length from 1-3 years and cost around $150-300 dollars per title.
In contrast, Kanopy offers public libraries a “pay per use” model. Under this model, the library pays a flat fee of a couple of dollars per patron view of a title, with no risk of a larger license fee being triggered. Kanopy appears to have experimented with this in at least one academic library, through an ongoing pilot at Delaware Community College. The jury is still out as to whether this approach is actually that cost-efficient for public libraries, but it certainly puts less onus on libraries to get as much use as possible out of any given title than the licensing models academic libraries are grappling with.
A major variable in these pricing models is how public and academic libraries perceive their role in serving their patrons. Many academic libraries have found that when they introduce unmediated access to Kanopy, their budgets can get overwhelmed by students who discover they can stream films of broad interest at no cost to them. Libraries reported that their bills were exploding and soon became concerned that they were supporting students’ weekend entertainment rather than academic research. (As a result of these and other marketplace dynamics, Ithaka S+R has been organizing a cohort of academic libraries interested in deeply examining campus needs for streaming media and opportunities to develop more sustainable solutions to this need.) The usage data that Kanopy currently provides does not conform to industry standards such as COUNTER, making it especially challenging for libraries to compare the value across different services and justify these expenditures.
Prior to Clarivate’s recent acquisition, Proquest would have seemed like a natural buyer for a service like Kanopy. ProQuest has been in acquisition mode, and video content has been an area of sustained growth for it following its own acquisition several years ago of Alexander Street Press. Alexander Street Press boasts a substantial catalog of streaming video for both public libraries and academic libraries. ProQuest has the potential to continue its efforts to integrate streaming media with its other offerings into an aggregated solution that can then be sold into subsets.
It is also important to keep an eye on competition in the streaming market beyond the traditional academic and public library markets. For example, Swank Motion Pictures provides streaming services not only to higher education, K12 schools, and public libraries, but also to other institutional markets such as cruise ships and healthcare facilities. Swank is also noteworthy for beginning to offer some streaming inside prison facilities. The troubled landscape for providing quality digital information resources to those who are incarcerated is an area of special focus for us at Ithaka S+R, and OverDrive has also made some inroads here through their National Corrections Library project with American Prison Database Systems (APDS). APDS specializes in providing technology such as tablets to facilitate content access to those incarcerated. Now with an enhanced video streaming selection in addition to its ebooks, OverDrive may try to make some further inroads here with library customers hoping to improve information access to those incarcerated, recognizing of course that censorship issues are a huge challenge for any who seek to intervene in this space (and an ongoing Ithaka S+R project is exploring just that).
Library frustration has not just been about streaming models. Libraries have also been concerned with the lending environment, especially for trade ebooks but also audiobooks, of which OverDrive has been the leading participant. OverDrive is not known for its usability or functionality (and the integration of Kanopy content could provide further challenges). In addition, the pricing models have proved troubling. These concerns drove a number of leading library organizations, such as DPLA, Lyrasis, NYPL, and funding agencies including IMLS, to create the community-controlled SimplyE ebook platform and reader. In this context DPLA’s recent announcement that Amazon Publishing content will be made available to public libraries through SimplyE really stands out, given the close partnership between Amazon and OverDrive in other areas.
Of course, Amazon is more broadly relevant in this space as well. Amazon is of course famous for consumer ebooks and streaming video. But in the library market, although Amazon has a substantial role in distributing print books, it does not have much presence at all in ebooks. While it is difficult to imagine this acquisition shifting Amazon’s position meaningfully, the development of a broader media empire for public libraries will surely register.
A New Media Empire?
The Kanopy acquisition ultimately helps OverDrive to become a more complete media solution for libraries, confirming the hypothesis that text content is only one element of the complete solution that libraries are seeking to provide for their communities. Other providers, such as ProQuest with Alexander Street Press and SAGE with Data Planet, have already invested substantially to expand their offerings and begin to integrate them. Integrating across content types seems to be a key value add for the intermediary.
OverDrive’s success under such a strategy hinges on the volume and variety of content it can provide, either by building up new collections or acquiring them from others. If an acquisitions strategy is to be continued, a few possibilities stand out. In light of Clarivate’s acquisition of ProQuest, will some of ProQuest’s humanistic and public library collections and platforms become available for purchase? Is this an opportunity for Cengage to dispose of some parts of its Gale portfolio? A reorientation of intermediaries to align with specific market segments would be an interesting development.
With video, there is still considerable room to grow, especially given the relatively low uptake from scholarly publishers thus far. So, another area to watch is whether ebook providers will feel pressure to add other content types. It will be interesting to see if DPLA and its partners will expand SimplyE to take on a fuller array of the media provision needs that public libraries provide to their communities. Is there a scenario in which they might attempt to build a community-controlled film / video streaming service to provide a fuller alternative to the media empire that OverDrive is establishing?
Looking ahead, the private equity owners of OverDrive’s growing public library media empire will be looking for an exit strategy. There is a scenario for bulking up OverDrive with further assets such that it could be a viable public offering. Or, another company might be interested in owning a public library media empire outright.